FAS (Free Alongside Ship)

This is the most popular Incoterm used for ocean freight shipping. Free Alongside Ship or FAS meaning is when the seller delivers the goods alongside the ship at the dock. The seller is responsible for all the costs and risks associated with cargo until it has been delivered at the dock.

After that, the responsibility and risk are transferred to the buyer. Under the FAS Incoterm, the seller must carry out the export formalities while the buyer is responsible for import formalities.

The buyer should load the vessel, import duties, main carriage, documentation and all carriage fees at the destination point.

FAS, or Free Alongside Ship, helps simplify the export process for both seller and buyer. Let us look at the buyer and seller obligations under the FAS agreement.

-Buyer Obligations

-Loading Charges: One of the main obligations of buyers under the FAS agreement is paying loading charges. The buyer needs to cover all the costs related to loading goods after they are placed alongside the vessel.

-Main Carriage: Under the FAS agreement, the buyer is also responsible for covering and arranging the cost of loading the goods onto the vessel.

-Discharge and Onward Carriage: Buyers must also fulfil another obligation under the FAS agreement by covering the cost of unloading products from the ship or vessel and arranging next carriage to the final place or destination.

-Import Duties and Formalities: The buyer is also responsible for completing import-related paperwork and paying all taxes and duties for bringing the cargo to the final destination and place.

-Pre-shipment Inspection Cost: The buyer is also responsible for the import clearance of goods. Accordingly, the buyer needs to pay the necessary inspection costs.

-Sellers Obligations

-Commercial Invoice and Documentation: One crucial obligation sellers need to fulfil is providing products or goods along with the required documentation, such as invoices, shipping documents, etc., for accurate customs and handling information.

-Export Packaging and Marking: In addition, sellers under the FAS agreement need to meet the criteria for packaging and marking as per the standards. The seller will cover all the packaging costs as per international standards.

-Pre-Carriage to Terminal: Another crucial responsibility of the seller is to deliver the cargo near the port of shipment. The seller will cover all the associated costs and risks.

-Delivery Alongside the Vessel: As mentioned in the agreement, the seller is responsible for delivering the goods and products alongside the vessel. They need to deliver the cargo to the agreed-upon port of shipment.

-Proof of Delivery: Lastly, the seller needs to provide the required proof of delivery to the buyer. It will state that the cargo is safely delivered to the decided location at a specified date and time.

An example of FAS shipping Incoterm is when a seller is responsible for delivering goods to the port and placing them alongside a specific ship, such as at a dock or terminal.

Suppose a company in India sells machinery to a buyer in Japan. Under FAS terms, the Indian seller would transport the machinery to a designated port and position it alongside the vessel that will transport it to Japan.

Once the goods are alongside the ship, the buyer assumes all risks and costs, including loading, shipping and import duties.

FAS Incoterm is a well-defined framework that outlines the responsibility of both seller and buyer. But the FAS contract or agreement, too, has advantages and disadvantages. Let us examine them in detail.

-Advantages of FAS

• One crucial advantage of Free Alongside Ship Incoterm is that the seller has a limited responsibility to place the goods alongside the vessel.

• Since the buyer has more control over the FAS shipping or logistic process, buyers have the freedom to choose the shipping companies, negotiate the freight rates and manage logistics at their convenience.

• Under a FAS agreement, costs and risks are clearly demarcated for both sellers and buyers. This means both parties understand their responsibilities, which helps reduce ambiguities.

-Disadvantages of FAS

• One significant disadvantage of FAS shipping is that it imposes a wide array of responsibilities on the buyer. They are responsible for various tasks such as loading cost, insurance, import and export formalities and more.

• Another disadvantage of FAS Incoterm is that sellers need to assist buyers in getting the transport documents. This is an additional responsibility in this Incoterm that is not available in other Incoterms.

• Under FAS Incoterm, dependency on vessels is another downside. If the vessel is delayed due to unpredictable weather, heavy traffic, etc., the seller's goods will remain waiting, which affects inventory management.

There are certain scenarios where it is best to avoid the Free Alongside Ship Incoterm, such as:

• If the buyer lacks the resources or knowledge to handle loading, shipping and insurance, then they should avoid FAS.

• FAS is not suitable for containerised goods, as the term is typically used for bulk or non-containerised cargo.

• If the cargo is particularly valuable or vulnerable to damage, then DDP or CIF might provide better protection.

• When dealing with ports that have complex regulations or require precise handling, it may be better to use Incoterms, where the seller manages more logistics, such as FOB or CFR.

These are two different Incoterms. The key difference between the both are listed below:

Free Alongside Ship is another crucial Incoterm for buyers and sellers engaged in international trade. It defines the seller's responsibility to deliver goods alongside the buyer's designated vessel at the port of shipment.

Once the goods are positioned alongside the ship, the buyer assumes all risks and costs, including loading, shipping and import duties. This method is best for non-containerised goods. Before using it, businesses should know all about the Free Alongside Ship Incoterms.

In addition to using the FAS Incoterm, those involved in the import and export business should consider purchasing a transit insurance policy to safeguard their goods during transit.

This insurance provides essential protection against unforeseen situations like damage or loss, ensuring that businesses can mitigate financial risks and secure their assets throughout the shipping process.

TATA AIG offers a variety of business insurance plans, including marine insurance policy that is tailored to meet your unique business needs.

With our marine insurance plan, you can safeguard your goods during transit, ensuring protection against potential risks like damage, theft, etc.

-What is Free Alongside Ship cost?

The Free Alongside Ship (FAS) cost includes all expenses the seller incurs to deliver the goods alongside the buyer's designated vessel at the port of shipment.

This typically covers transportation to the port, export customs clearance and port handling fees. From that point, the buyer assumes all costs, including loading, shipping and insurance.

-Why is FAS used?

FAS is used in international trade primarily for bulk or non-containerised cargo. It is beneficial when the buyer wants control over the shipping process after the goods are delivered to the port.

-Which one is better: FAS or FOB?

FOB or Free on Board is generally considered better than FAS or Free Alongside Ship for most transactions because it offers more comprehensive coverage.

In FOB, the seller is responsible for loading the goods onto the buyer's ship, reducing the buyer's risk during this process. In contrast, FAS shifts the responsibility to the buyer as soon as the goods are placed alongside the ship.